Monday, January 30, 2006

The envy of the world

A fascinating article in The Economist about the crisis in the American healthcare system. Since the US is notorious for its lack of full health coverage (46 million people are left uninsured) then it's not well-known that the US spends more on healthcare than any other country in the world.I'm not au fait with the functioning of healthcare systems, perhaps because I live in a country with a centralised behemoth. The US system is predominantly employer-based and arose from historic accident. The US government gives tax subsidies to employers who pay for health insurance - exceptions are the poor/old for whom the government pays directly, people who buy their own health insurance and the unemployed, un-'poor' (e.g. students). Health care is supplied by a numerous providers. US healthcare provision is becoming increasingly expensive to government and companies - economic growth and employment is affected. The Economist recommends that the US adopts the system existing in many European countries - a "hypothecated" health tax raised by government and used to pay for care from a variety of healthcare providers. This should maintain choice and innovation whilst lessening the problems of the system. European-style health care provision was also the approach favoured by David Laws infamous article in the Orange Book (Jo Otten summarises the chapter here). As with all policy, the devil is in the detail. The Economist states that healthcare is an area where market forces traditionally fall down - there is a distinction between the consumer (patients and doctors) and the person paying. The poorest are likely to be those with the highest insurance premiums (the elderly, etc.). An alternative vision of non-monolithic healthcare provision is presented by Steve Webb here. Steve Webb's approach seems to be the same as Chris Huhne's (this is the best I can do) which is to keep the NHS entirely government funded/provided, but to devolve management and control down to a local level to allow experimentation. As I say, I'm not hot on healthcare provision.Neither of these systems is likely to be accepted in the US - the arguments/solutions are very different. But it got me thinking about what type of healthcare provision would be best for the UK. It would have to provide social justice, fairness and equality of opportunity whilst also being efficient, accountable, of high quality, and ideally giving choice. This is one issue I'm open to suggestions...

8 Comments:

Health care is a very tricky area...We certainly do need to stop central government fiddling with it.

The case in the US is horrible. My girlfriend works part time in hospitals but she's a student and cannot afford health insurance and doesn't meet the requirements for medicaid/medicare.However, she hates that there are people who come in and get everything paid by the taxpayer when they don't bother even trying to work (whereas the immigrants, both legal and illegal tend to insist on paying, even if its a small amount a week over several months).I have sympathy with that view, but I cannot advocate letting anyone go without health care if they need it.

How we can provide the best quality health care for all without bankrupting the country is something I don't have a clue about, clearly we can't have a system where millions fall through the gaps but on the otherhand it must be affordable or we will end up being crippled by the costs.

Perhaps is National Insurance actually worked how it was supposed to then we might be in a better position...

I think my article was somewhat disingenuous since I started on the US and then switched to musings closer to home.

The reason the US system is having problems, the Economist claims, is because of the tax subsidies to firms and because of the separation of consumer from the person holding the purse (insurance company or government). There's also a big issue with law suits for medical negligence in the US.

None of this stuff applies to the UK. The duality in the post was prompted by my reading the Economist article, wondering if their proposal was David Laws' and then realising I hadn't really developed my thoughts on healthcare provision beyond vagaries into the nuts-and-bolts. If you want equality of access but baulk at our overcentralised system then the devil is in the detail.

The market orientation of healthcare in the US is of course far more extreme than Laws' proposal. The US is quite happy with the idea of people getting what they pay for, even if that means nothing at all in some cases.

And yet, even with consumer power much greater than under Laws or in the UK at present, the US still has terrible difficulty controlling costs. That some people pay or contribute to health care costs should have some benefits in a market economy, so where are the benefits?

Insurance companies are suggested by Laws as wise buyers of health care services, but the American experience shows that they aren't.

Buying healthcare is difficult - it is a bit like buying bespoke software. You would need your own professionals to assess the quality of the product, doubling your costs. An unwise purchase might be preferable.

And if the US expects big gains from going down the performance-target route, we have enough experience of it to disabuse them.

The market orientation of healthcare in the US is of course far more extreme than Laws' proposal. The US is quite happy with the idea of people getting what they pay for, even if that means nothing at all in some cases.

I was wondering if The Economist's suggestion was David Law's suggestion.

... Just realised what's confusing everyone - the David Laws'-esque reference was in the editorial... The Economist writes:

In the longer term, America, like this adamantly pro-market newspaper, may have no choice other than to accept a more overtly European-style system. In such a scheme, the government would pay for a mandated insurance system, but leave the provision of care to a mix of public and private providers. Rather than copying Europe's distorting payroll taxes, the basic insurance package would be paid for directly by government, though that cash might be raised by a “hypothecated” tax which would make the cost of health care more evident. The amount of cash given to insurers would take account of individual health risks, thus reducing insurers' incentives to compete by taking only the healthiest patients.

Insurance companies are suggested by Laws as wise buyers of health care services, but the American experience shows that they aren't. Buying healthcare is difficult - it is a bit like buying bespoke software. You would need your own professionals to assess the quality of the product, doubling your costs. An unwise purchase might be preferable.

The Economist suggests that the problem with the US system is:

1. Litigation and the huge payouts for medical error which has increased insurance premiums2. The separation between the consumer/doctor (who selects healthcare) and the company/government who pays. This encourages expensive procedures in the same way as after a minor car dint, insurers often end up paying for a respray. They put up premiums but with car insurance, the consumer pays.3. Tax subsidies to companies who are disinclined to choose cheap procedures4. Doctors and health providers who take advantage of this to increase costs

Neither of these suggest that the insurer is choosing badly. The insurer is being disincentivised from being cheap.

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